AT&T Buy of T-Mobile Likely Faces Huge Fight for Regulatory Approval

The withdrawal of T-Mobile from the national stage would reshape the regulatory landscape. It has led competitors to AT&T and Verizon Wireless in many battles, from pursuit of a data roaming mandate to special access reform, to the future of the 700 MHz D-block. T-Mobile has also been the most spectrum hungry of the four national major carriers, as it seeks spectrum below 2 GHz for a 4G deployment.

"It is absolutely essential that both the Department of Justice and the FCC leave no stone unturned in determining what the impact of this combination is on the American people,” said Sen. Jay Rockefeller, D-W.Va., chairman of the Commerce Committee, which he promised will take a hard look at the merger.

Credit Suisse analyst Jonathan Chaplin wrote in a research note the deal faces an “enormous” challenge winning approval from regulators. “We have never seen a deal with more regulatory risk be attempted in the U.S.,” he said. “It is unlikely that AT&T would attempt a deal that they knew would fail; however, we can’t see how they would get this through without massive divestitures and concessions."

The carriers said in a statement: “AT&T’s acquisition of T-Mobile USA provides an optimal combination of network assets to add capacity sooner than any alternative, and it provides an opportunity to improve network quality in the near term for both companies’ customers … In addition, it provides a fast, efficient and certain solution to the impending exhaustion of wireless spectrum in some markets, which limits both companies’ ability to meet the ongoing explosive demand for mobile broadband."

"This transaction delivers significant customer, shareowner and public benefits that are available at this level only from the combination of these two companies with complementary network technologies, spectrum positions and operations,” said AT&T CEO Randall Stephenson. “We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities, we can better meet our customers’ current demands, build for the future and help achieve the President’s goals for a high-speed, wirelessly connected America."

Public interest groups reacted with a torrent of disapproval, presaging what is expected to be a massive fight at the FCC. “The combination of the second-largest wireless carrier, AT&T, with the fourth-largest, T-Mobile is, as former FCC Chairman Reed Hundt once said, ‘unthinkable,'” said Public Knowledge President Gigi Sohn. “We urge policymakers to think similarly today. The wireless market, now dominated by four big companies, would have only three at the top. We know the results of arrangements like this -- higher prices, fewer choices, less innovation."

Sascha Meinrath, director of the New America Foundation’s Open Technology Initiative, predicted that review of the merger will take several years to play out. “As shocking as this proposed merger seems at the moment, we're a long, long way until the die is actually cast, and I'm skeptical that this will make it through regulatory, much less anti-trust, review,” Meinrath said. “Given that both companies have already signed off on the deal, it is also clear that throughout the current network neutrality proceeding, this was on the front burner for both companies. It would explain why Verizon was out in front haranguing the FCC while AT&T was far more subdued. More importantly, it begs review of the past year’s filings by AT&T to see how their filings and positions play given this merger."

"Our biggest concern is the effect this will have on consumers pocketbooks and competition,” said Parul Desai, an attorney with Consumers Union. “AT&T is already a giant in the wireless marketplace, looking to get bigger. From a consumer’s perspective, it’s difficult to come up with any justification or benefits for letting AT&T swallow up one of its few major competitors. We plan to work very closely with regulators and lawmakers to carefully scrutinize this deal and what it would mean to people’s pocketbooks."

FCC Commissioner Meredith Baker, who recently urged the FCC to revamp its merger policies, was the lone FCC commissioner to issue a statement Sunday. Baker, along with FCC Chairman Julius Genachowski and Commissioner Robert McDowell, are expected to speak at CTIA. “I hope that the Commission’s review will be careful, timely and focused on competitive issues directly related to the proposed transaction,” Baker said.

"Don’t believe the hype: There is nothing about having less competition that will benefit wireless consumers,” Free Press Research Director Derek Turner said, responding to some of the promised benefits of the merger. “If regulators approve this deal, they will further cement duopoly control over the wireless market by AT&T and Verizon."

But Debra Berlyn, director of the Consumer Awareness Project, said the deal “will help to bring the U.S. much closer to the President’s goal of bringing high-speed mobile broadband to consumers across the country.” Mobile Future Chairman Jonathan Spalter said the combination of the companies with their “world-class services, technologies, know-how, and leadership promises to deliver the best possible services and expanded access to American consumers to meet growing demand."

Free State Foundation President Randolph May said the merger will get the close regulatory scrutiny it deserves from regulators. “My preliminary sense is that the benefits from the proposed merger, with the promise of enhanced 4G network capabilities implemented more quickly than otherwise would be the case, outweigh the costs,” May said. “Even after the merger, the wireless market should remain effectively competitive with the companies that remain.”

Deutsche Telekom entered the U.S. market in 2001, buying VoiceStream and changing the name to T-Mobile USA a year later.